Best time for NRIs to invest in India

Property prices have been appreciating in India. However, for the expat Indian, it has been a small increase due to the fall of the rupee against the US dollar. This has made investments in India's real estate sector more economical, profitable and worthwhile for investors abroad. The real estate sector in India is not only booming but has also become more transparent after the introduction of recent policy changes namely the Real Estate Regulation Act (RERA), the Benami Transaction Act and the Goods and Services Tax (GST). Investment in real estate is becoming an attractive destination for NRIs due to the reasons that have been cited by several top newspapers and independent research agencies:

Thanks to new real estate rules, buying a property for a non-resident Indians (NRI) is easier than ever before. Anyone with an Indian passport can invest in Indian real estate, given that the property is not an agricultural land, plantation property or a farmhouse[i]. (as reported on The Hindu)

The Narendra Modi-led government has given a significant boost to the confidence of the non-resident Indians (NRIs), with their investment into the primary residential real estate market expected to almost double in 2017[ii]. (as reported on economictimes.com)

It is expected that real estate sector will incur more non-resident Indian (NRI) investments in both the short term and the long term. Bengaluru is expected to be the most favored property investment destination for NRIs, followed by Ahmedabad, Pune, Chennai, Goa, Delhi and Dehradun[iii]. (as reported by India Brand Equity Foundation’s report on real estate, 2017)

The year 2017 has heralded a positive shift in Indian real estate already. Lowering of interest rates, the announcement of new credit linked subsidy scheme have made market finance more accessible. Regulatory updates like RERA and GST are also inducing a lot of positivity in the market. But the biggest news is coming from the affordable housing space which has now been designated with the infrastructure status. NRIs on their part have rewarded these efforts with reinforced confidence and vision[iv]. (as reported on finacialexpress.com)

There is no restriction on the number of properties than an NRI can invest in. An NRI, as well as a Person of Indian Origin (PIO), can purchase as much residential as well as commercial properties in India as they want[v]. ( as reported on economictimes.com)

The GST is the single-biggest tax reform ever introduced in India. GST aims at eliminating the difference in indirect taxes applicable to various states. The real estate sector stands to benefit from the fact that GST would provide more clarity on tax-credits for real estate transactions and allowance of input credit would reduce the price of properties[vi]. (as reported on moneycontrol.com)

The Benami Transactions (Prohibition) Act provides an effective regime for the prohibition of benami transactions. The amended law empowers the specified authorities to attach benami properties which can eventually be confiscated provisionally. Besides, if a person is found guilty of the offence of benami transaction by the competent court, he shall be punishable with rigorous imprisonment (which may extend up to seven years), and shall also be liable to a fine which may extend to 25 percent of the fair market value of the property[vii]. (as reported on moneycontrol.com)

NRIs should be aware that FATCA (Foreign Accounts Tax Compliance Act ) does not supersede the Double Tax Avoidance Agreement (DTAA) that the United States has signed with various countries. DTAA is sacrosanct. And the DTAA vide article 6 says if a resident of the USA holds any immovable property in India, income from that place becomes amenable to taxation by the Indian government, period. Likewise, residents of India will have to pay tax in the US on income arising out of their investments in immovable properties in the USA[viii]. (as reported on firstpost.com)

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